What’s Our Investment Philosophy And How Will It Help You Succeed?

At Metanoia Financial, we give your investments the guidance and attention they deserve so you can enjoy your life. With us on your team, you can spend less time stressing about money and market movements and more time on the things you love. 


Over the years, we’ve developed a strong philosophy that serves as the foundation for our investing practices. We’re passionate about helping you build a balanced and efficient investment plan that helps you reach your unique financial goals. 


You’ve likely heard the saying, “don’t put all your eggs in one basket.” At Metanoia, we recognize the importance of having a diverse portfolio, a balanced strategy, and, most importantly, a financial advisor advocating for your best interest. 


There are three main areas of investing that make up our philosophy:


  1. Diversification

  2. Asset Allocation

  3. Risk Management


We believe that these three areas result in a balanced investment plan. Of course, all investment plans are tailored to each individual or couple, but these three areas still remain of utmost importance.

Long-Term Diversification

Diversification of your assets is arguably the “golden rule” of investing. Having a diverse portfolio means investing in different classes of assets (stocks, bonds, real estate, etc.), market sectors, industries, and risk levels. 


Building a diversified portfolio can have notable effects, like


  • Minimizing the risk of catastrophic loss to your overall portfolio

  • Reducing your volatility

  • Providing a more predictable investment experience

  • Balancing both risks and returns in the long run

Is the Grass Greener on the Riskier Side?

Take a horse race as an example. Before you choose a horse, you make sure to do your research. You select the youngest, healthiest, and fastest horse out of the bunch. All of those things added up to a good chance of winning!


What you didn’t see is that this horse has a new jockey, has never raced on this track before, and gets nervous easily. Now, the prospects don’t sound too good… 


Unfortunately, the horse you chose didn’t win, and thus, you lost all of the money you placed on bets. You’re especially upset because the horse that won was the horse you almost chose—like the disappointment of changing your answer on a multiple-choice test.


But what if you split your bet between both horses?


Sure, one horse still would have lost, but you would get to enjoy the winnings of the other. This example illustrates that you increase your chance of seeing returns when you spread your money into different investments. 


We’re not saying that investing is similar to placing bets or taking a gamble rather than being over-reliant on certain assets only turns up the pressure cooker. While the result could be a considerable gain in one area, you run the risk of a sizable loss.


That’s why diversification is so important! 


By not restraining yourself by industries, regions, or classes, you allow more opportunities for lucrative gains. While at the same time spreading out the chance of loss due to the inclusion of lower-risk investments. It’s truly a win-win scenario!

Asset Allocation

Now you know you have to diversify, but what do you actually invest in?


Cue the next area of our philosophy, asset allocation. 


Asset allocation is a strategy in which investors set aside a certain percentage of their dollars for multiple types of asset classes. For example, you may have a set percentage going into stock, another into bonds, cash, real estate, etc. 


Similar to diversification, this method helps reduce risk. We can customize your asset allocation based on your risk tolerance and stage oflife. So the new worker can be all equities, while the retiree may desire some some bonds and cash to generate a consistent income.. Your portfolio allocation will live and breathe with you as you age.


While everyone’s asset allocation will look different depending on their risk, time horizon, and goals, a hallmark of our investment philosophy is concentrating on low-cost and tax-efficient investments, like exchange-traded funds (ETFs) and index funds. 


This low-cost, passive approach means that we aren’t about jumping on all the latest trends or attempting to outperform the market. Instead, we want to help you build a deliberate and strategic plan that helps you reach your goals long-term. 

Risk Management

If the thought of taking risks with your money makes you sweat, don’t worry because part of our investment philosophy is the importance of risk management. 


Risk management helps us by preparing for the unexpected and forecasting potential problems. It’s important to note that no one person’s risk management plan will be the same, and in addition, it’s never stagnant. Risks come and go, your priorities change, and your risk management plan needs to suit your varying needs. 


In general, there are two facets of risk management:


  • Risk tolerance

  • Risk capacity

Understanding Your Risk Tolerance (Knowing It Will Change)

Your risk tolerance denotes your propensity for taking risks. 


Here, you’ll consider how much risk you can tolerate in your portfolio. It’s essential to consider this question in the long term. So, if you’re newer in your career and you’re saving for retirement, you might be able to take on more risk since you’ll have plenty of time to weather market storms.


Meanwhile, someone who is five years away from retirement and close to needing to access their funds will likely want to invest in safer classes. Simply because if your high-risk investments take a significant hit, you don’t have much time to recuperate those funds.

What’s Risk Capacity

While risk tolerance ascertains your ability to stomach risk and volatility in your portfolio, risk capacity takes another look. 


This metric reveals how much risk you need to take to reach your goals. So, even if you’re a conservative investor, you likely can’t adequately save for retirement with cash and fixed-income sources alone. 


We can help you determine your risk tolerance and capacity to build a portfolio that works for you and your long-term goals. 

Our Investment Philosophy, Your Plan

While we’ve refined our investment philosophy, it isn’t complete without your unique goals, values, and life plan. 


We’re passionate that every investment plan should start and end with what’s most important to you. Doing so brings intention, meaning, and purpose to long-term investing.


In life, there are many things that we cannot control. At Metanoia Finance, we will help you focus on what you can control. 

Let’s work together to make a custom investment plan that works best for you. Schedule your free consultation with us today.